Bank Profits Mask Lackluster Business Lending

Senior Editor

The first big banks to report second-quarter earnings on Friday sounded cautious notes about the state of commercial lending, even as increasing credit quality drove profits sharply higher for Wells Fargo & Co. and J.P. Morgan Chase & Co.

Commercial loans at Wells Fargo increased by a modest $1.8 billion during the second quarter from the first quarter, and Chief Financial Officer Tim Sloan said the increase came from “broad based growth.”

Commercial loans totaled $363.4 billion, up from $361.7 billion. Wells Fargo’s total loan book was $802 billion, up $2.0 billion from the first quarter.

At J.P. Morgan, CFO Marianne Lake said its commercial loan portfolio was roughly flat compared with the first quarter, as “very strong growth in commercial real estate…[was] offset by lower corporate lending.”

“Our clients have excess cash and are keeping their utilization rates low, but we’ve also seen a continuation of competitive pricing and aggressive structuring,” she said, according to an unedited transcript of the conference call provided by FactSet.

“We are holding the line in choosing quality over growth,” she said, “and this of course is reflected in our strong credit performance.”

Real estate industry veteran Diane Morefield, EVP and CFO of Strategic Hotels & Resorts, Inc., discusses the challenges she has undertaken throughout her career in both finance and operational roles and her management style. While viewing herself as a “conservative voice” in an industry known for risk-taking, she says it's important to take risks when it comes to building one's career.